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Managerial Accounting Chapter 2
Terms in this set (58)
what is cost accounting system
Accounting system for manufacturing activities based on the perpetual inventory system
general accounting system definition
Accounting system for manufacturing activities based on the periodic inventory system
what is job order production
Production of special-order products; also called customized production,
in job order production what is a "job"
Production of a customized product or service
what is a job lot
Production of more than one unit of a customized product or service
define target cost
Maximum allowable cost for a product or service; defined as expected selling price less the desired profit
what is a job order cost accounting system
Cost accounting system to determine the cost of producing each job or job lot
what is A job cost sheet
Separate record maintained for each job
define Goods in Process Inventory
Account in which costs are accumulated for products that are in the process of being produced but are not yet complete; also called work in process inventory.
define Finished Goods Inventory account
Account that controls the finished goods files, which acts as a subsidiary ledger (of the Inventory account) in which the costs of finished goods that are ready for sale are recorded.
What is the difference between a job and a job lot?
A job is a special order for a custom product. A job lot consists of a quantity of identical, special-order items.
true or false:
The collection of job cost sheets for unfinished jobs makes up a subsidiary ledger controlled by the Goods in Process Inventory account,
true or false:
Job cost sheets are financial statements provided to investors,
true or false:
A separate job cost sheet is maintained in the general ledger for each job in process.
materials ledger cards define
Perpetual record updated each time units are purchased or issued for production use
what is materials requisition
Source document production managers use to request materials for production; used to assign materials costs to specific jobs or overhead
define clock cards
Source document used to record the number of hours an employee works and to determine the total labor cost for each pay period.
what are time tickets
Source document used to report the time an employee spent working on a job or on overhead activities and then to determine the amount of direct labor to charge to the job or the amount of indirect labor to charge to overhead
predetermined overhead rate
Rate established prior to the beginning of a period that relates estimated overhead to another variable, such as estimated direct labor, and is used to assign overhead cost to production
formula to predetermined overhead rate
estimated overhead costs divided by estimated activity base
In job order cost accounting, which account is debited in recording a raw materials requisition?
Goods in Process Inventory if for a job
What are four sources of information for recording costs in the Factory Overhead account?
Four sources of factory overhead are materials requisitions, time tickets, vouchers, and adjusting entries.
Why does job order cost accounting require a predetermined overhead rate?
Since a job order cost accounting system uses perpetual inventory records, overhead costs must be assigned to jobs before the end of a period. This requires the use of a predetermined overhead rate.
What events result in a debit to Factory Payroll?
Debits are recorded when wages and salaries of factory employees are paid or accrued.
What events result in a credit to factory payroll?
Credits are recorded when direct labor costs are assigned to jobs and when indirect labor costs are transferred to the Factory Overhead account.
what is under applied overhead
Amount by which overhead incurred in a period exceeds the overhead applied to that period's production using the predetermined overhead rate.
define over applied overhead
Amount by which the overhead applied to production in a period using the predetermined overhead rate exceeds the actual overhead incurred in a period.
If we do not adjust for under applied overhead, will net income be overstated or understated?
In a job order cost accounting system, why does the Factory Overhead account usually have an overapplied or underapplied balance at period-end?
Overapplied or underapplied overhead usually exists at the end of a period because application of overhead is based on estimates of overhead and another variable such as direct labor. Estimates rarely equal actual amounts incurred.
When the Factory Overhead account has a debit balance at period-end, does this reflect overapplied or underapplied overhead?
A debit balance reflects underapplied factory overhead.
The production activities for a customized product represent a(n
Job order manufacturing is also known as:
Dell Builders manufactures each house to customer specifications. It most likely would use:
Job order costing
A document in a job order cost accounting system that is used to record the costs of producing a job is a
Job cost sheet.
A job cost sheet includes...
Direct material, direct labor, overhead.
A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $20,000?
The rate established prior to the beginning of a period that relates estimated overhead to an allocation factor such as estimated direct labor, and that is used to assign overhead cost to jobs, is the:
Predetermined overhead allocation rate.
If overhead applied is less than actual overhead, it is
what is an example of job order production
what are the 3 steps before beginning job order production
1-predict costs to complete job
2-negotiate price to determine whether to take job
3-schedule production of the job
cost accounting systems used by manufacturing companies are based on the...
perpetual inventory system
what kind of costing would a custom house builder use
job order costing
document in a job order cost accounting system that is used to record the costs of producing a job is...
job cost sheet
what does a job cost sheet include
direct materials, direct labor, and overhead
perpetual record of raw materials item that records data on the quantity and cost units purchased, units issued for use in production, and units that remain in raw materials inventory is...
materials ledger card
what are the debits and credits when raw materials are used in production using a job cost accounting system
debit-goods in process and overhead
what are debits and credits when factory payroll costs are recorded in a job cost accounting system
debit-goods in process inventory and overhead
the overhead applied to a job during a period is recorded with what debits and credits
debit-goods in process inventory
what is COGM Formula
beginning GIP plus DC minus ending GP
what is the formula for predetermined overhead (allocation) rate
estimated overhead divided by activity base
company has overhead allocation rate of 125% of direct labor costs. how do you determine overhead rate if DL is 20,000
20,000 times 1.25 equals 25,000 is predetermined overhead rate
if under applied (under estimated) overhead at the end of the period what is the journal entry
if over applied (over estimated) overhead at the end of the period what is the journal entry
if overhead applied is less than actual overhead then...
total manufacturing costs formula
DL plus DM plus FOH
cost of materials formula
beginning RM plus purchases minus ending RM
Beginning GIP plus total manufacturing cost minus ending GIP
beginning FG plus COGM minus ending FG
Recommended textbook explanations
Glencoe Accounting: First Year Course
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